AGREEMENT AND PLAN OF MERGER

 

TABLE OF CONTENTS

					Page
ARTICLE I		THE MERGER			1
Section 1.01			The Merger		1
Section 1.02			Closing		1
Section 1.03			Effect of the Merger		2
Section 1.04			Certificate of Incorporation of the Surviving Corporation		2
Section 1.05			Bylaws of the Surviving Corporation		2
Section 1.06			Directors and Officers of the Surviving Corporation		2
ARTICLE II		EFFECT OF THE MERGER ON THE CAPITAL STOCK OF  THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES			2
Section 2.01			Conversion of Securities		2
Section 2.02			Adjustment to Merger Consideration		3
Section 2.03			Dissenting Stockholders		3
Section 2.04			Exchange of Certificates		4
Section 2.05			Stock Transfer Books		7
Section 2.06			Stock Options		7
Section 2.07			Stock Rights		7
Section 2.08			Warrants		7
Section 2.09			Further Actions		8
Section 2.10			Employee Stock Purchase Plan		8
ARTICLE III		REPRESENTATIONS AND WARRANTIES OF THE COMPANY			9
Section 3.01			Organization and Qualification		9
Section 3.02			Capitalization		9
Section 3.03			Subsidiaries		10
Section 3.04			Authority; Non-Contravention; Approvals		11
Section 3.05			Reports and Financial Statements		12
Section 3.06			Absence of Undisclosed Liabilities		14
Section 3.07			Litigation		14
Section 3.08			Registration Statement, Etc.		14
Section 3.09			Compliance with Applicable Law		15
Section 3.10			Taxes		15
Section 3.11			Employee Benefit Plans; ERISA		16

 

i

 

 

Section 3.12			Opinion of Financial Advisor		17
Section 3.13			Brokers and Finders		17
ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF PARENT			17
Section 4.01			Organization and Qualification		17
Section 4.02			Capitalization		18
Section 4.03			Subsidiaries		19
Section 4.04			Authority; Non-Contravention; Approvals		19
Section 4.05			Reports and Financial Statements		21
Section 4.06			Absence of Undisclosed Liabilities		22
Section 4.07			Litigation		22
Section 4.08			Registration Statement, Etc.		23
Section 4.09			Taxes		23
Section 4.10			Employee Benefit Plans; ERISA		24
Section 4.11			Brokers and Finders		25
Section 4.12			Interim Operations of Merger Sub		25
ARTICLE V		COVENANTS			25
Section 5.01			Conduct of Business by the Company Pending the Closing		25
Section 5.02			No Solicitation by the Company		25
Section 5.03			Employee Benefits		27
Section 5.04			Registration Statement; Joint Proxy Statement; Stockholder Meetings; Listing of Shares		29
Section 5.05			Section 16 Matters		30
Section 5.06			Public Announcements		30
Section 5.07			Expenses and Fees		31
Section 5.08			Agreement to Cooperate		31
Section 5.09			Directors’ and Officers’ Indemnification		32
Section 5.10			Rule 145		33
Section 5.11			Tax Free Merger		33
Section 5.12			Stockholder Litigation		33
Section 5.13			Board of Directors		34
Section 5.14			Further Assurances		34

 

ii

 

 

ARTICLE VI		CONDITIONS TO THE MERGER			34
Section 6.01			Conditions to the Obligations of Each Party		34
Section 6.02			Conditions to the Obligations of Parent		35
Section 6.03			Conditions to the Obligations of the Company		35
ARTICLE VII		TERMINATION			36
Section 7.01			Termination		36
Section 7.02			Effect of Termination		37
ARTICLE VIII		MISCELLANEOUS			37
Section 8.01			Non-Survival of Representations and Warranties		37
Section 8.02			Notices		37
Section 8.03			Defined Terms		38
Section 8.04			Interpretation		45
Section 8.05			Miscellaneous		45
Section 8.06			Counterparts		45
Section 8.07			Amendments; Extensions		45
Section 8.08			Entire Agreement		46
Section 8.09			Severability		46
Section 8.10			Specific Performance		46
Section 8.11			Disclosure		46

 

EXHIBITS

Exhibit A - Form of Affiliate Letter

Exhibit B – Form of Voting Agreement of Parent

Exhibit C – Form of Voting Agreement of the Company

Exhibit D – Form of Tax Representation Letter of Parent

Exhibit E – Form of Tax Representation Letter of the Company

 

iii

 

 

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), is dated as of September 20, 2006 (the “ Signing Date ”), by and among Crdentia Corp., a Delaware corporation (“ Parent ”), iVOW Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), and iVOW, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved, and deem it advisable and in the best interests of their respective stockholders to consummate, the merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”);

WHEREAS, for federal income tax purposes, Parent, Merger Sub and the Company intend that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and that this Agreement shall be, and hereby is, adopted as a plan of reorganization for purposes of Section 368(a) of the Code; and

WHEREAS, certain capitalized terms used herein are defined in Section 8.03;

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

THE MERGER

Section 1.01           The Merger .  Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub shall merge with and into the Company at the Effective Time.  Following the Effective Time, the separate corporate existence of the Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

Section 1.02           Closing .  The closing of the Merger (the “ Closing ”) shall take place on the fifth Business Day after the satisfaction or waiver (subject to applicable Law) of the conditions set forth in Article VI (excluding conditions that, by their nature, cannot be satisfied until the Closing Date, but subject to the satisfaction or, to the extent provided by Law and this Agreement, waiver of those conditions), unless this Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto (the actual date of the Closing being referred to herein as the “ Closing Date ”).  The Closing shall be held at the offices of Morrison & Foerster LLP, 12531 High Bluff Drive, Suite 100, San Diego, California 92130, unless another place is agreed to in writing by the parties hereto.  Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall file a certificate of merger (the “ Certificate of Merger ”) executed in accordance with the relevant

 

provisions of the DGCL and shall make all other filings or recordings required under the DGCL.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such later time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “ Effective Time ”).

Section 1.03           Effect of the Merger .  At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL.  Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, Liabilities and duties of the Company and Merger Sub shall become the debts, Liabilities and duties of the Surviving Corporation.

Section 1.04           Certificate of Incorporation of the Surviving Corporation .  The certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein, by the DGCL or by applicable Law, except that Article I of the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows:  “The name of the corporation shall be iVOW, Inc.”

Section 1.05           Bylaws of the Surviving Corporation .  At and after the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation, until amended as provided therein, by the DGCL or by applicable Law.

Section 1.06           Directors and Officers of the Surviving Corporation .

(a)           The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation or bylaws of the Surviving Corporation or as otherwise provided by Law.

(b)           The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation or bylaws of the Surviving Corporation or as otherwise provided by Law.

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

Section 2.01           Conversion of Securities .

(a)           At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or any holder of any shares of common stock, par

 

value $0.01 per share, of the Company (“ Company Common Stock ”) or any capital stock of Merger Sub:

(i)            Subject to this Article II, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares referred to in Section 2.03) shall be converted into the right to receive that number of shares of common stock of Parent, par value $0.0001 per share (“ Parent Common Stock ”), equal to the number obtained by dividing:

(A)          that number of shares of Parent Common Stock obtained by dividing (x) $3,500,000, subject to adjustment as provided in Section 2.02, by (y) the average of the closing sale prices for Parent Common Stock for each of the twenty (20) consecutive trading days ending the second complete trading day prior to the Effective Time, as reported on the OTC Bulletin Board, (the “ Merger Consideration ”); by

(B)           the total number of shares of Company Common Stock issued and outstanding at the Effective Time;

such quotient to be referred to as the “ Exchange Ratio ”, and to be payable upon the surrender of the Certificates (as defined in Section 2.04(b)).

(ii)           From and after the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a Certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive, upon surrender of such Certificate in accordance with Section 2.04, the Merger Consideration pursuant to this Section 2.01(a), any cash in lieu of fractional shares payable pursuant to Section 2.04(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.04(c), without interest.

(iii)          All shares of Company Common Stock that are held by the Company as treasury shares or owned by Parent or any wholly-owned Subsidiary of Parent, in each case, immediately prior to the Effective Time, shall be cancelled and retired and shall cease to exist, and no cash, securities of Parent or other consideration shall be delivered in exchange therefor.

Section 2.02           Adjustment to Merger Consideration .  The Merger Consideration shall be reduced by (i) the amount of all outstanding bank and financing debt of the Company recorded on the Company’s balance sheet as of the Signing Date and assumed by Parent at the Effective Time (the “ Assumed Debt ”), (ii) the value of any Uncollected Accounts Receivable, and (iii) the value of any Surviving Warrants, as calculated based on the Black-Scholes option pricing model.  In the event that the Merger Consideration is adjusted as provided for in this Section 2.02, all references in this Agreement to the “ Merger Consideration ” shall refer to the Merger Consideration as adjusted in this Section 2.02 except as may otherwise be specified herein.

 

Section 2.03           Dissenting Stockholders .  Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and held by a holder thereof who shall not have voted to adopt this Agreement and who properly exercises and perfects appraisal rights for such shares in accordance with Section 262 of the DGCL (the “ Dissenting Shares ”) will not be converted as described in Section 2.01(a) but shall be converted into the right to receive such consideration as may be determined to be due pursuant to Section 262 of the DGCL; provided , however , that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal and payment under the DGCL, the right of such holder to such appraisal of its shares of Company Common Stock shall cease and such shares of Company Common Stock shall be deemed converted as of the Effective Time into the right to receive the Merger Consideration to which any such holder is entitled pursuant to Section 2.01(a), any cash in lieu of fractional shares payable to any such holder pursuant to Section 2.04(e) and any dividends or other distributions to which any such holder is entitled pursuant to Section 2.04(c).  The Company shall give Parent (a) prompt notice of any written demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to Section 262 of the DGCL and received by the Company and (b) the opportunity to direct in compliance with all applicable Laws all negotiations and proceedings with respect to demands for appraisals under the DGCL; provided , that any definitive actions taken by the Company at the direction of Parent in respect of any such negotiations and proceedings may be conditioned upon occurrence of the Effective Time.  The Company shall not, except with prior written consent of Parent, (i) voluntarily make any payment with respect to any demands for appraisal for Dissenting Shares, (ii) offer to settle, or settle, any such demands, (iii) waive any failure to timely deliver a written demand for appraisal in accordance with the DGCL or (iv) agree to do any of the foregoing.

Section 2.04           Exchange of Certificates .

(a)           As of the Effective Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust company designated by Parent and reasonably satisfactory to the Company (the “ Exchange Agent ”), for the benefit of the holders of shares of Company Common Stock, for exchange in accordance with this Article II through the Exchange Agent certificates representing a number of shares of Parent Common Stock equal to the Exchange Ratio multiplied by the number of outstanding shares of Company Common Stock held by holders of record other than Parent, Merger Sub or any wholly-owned Subsidiary of Parent or Merger Sub, rounded down to the nearest whole number.  For purposes of such deposit, Parent shall assume that there will not be any fractional shares of Parent Common Stock.  Parent further agrees to provide to the Exchange Agent, from time to time as needed, immediately available funds sufficient to pay cash in lieu of fractional shares pursuant to Section 2.04(e) and any dividends and other distributions pursuant to Section 2.04(c).  Any cash and certificates representing Parent Common Stock deposited with the Exchange Agent shall hereinafter be referred to as the “ Exchange Fund .”  The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be paid per share of Company Common Stock pursuant to Section 2.01 out of the Exchange Fund.  Except as contemplated by Sections 2.04(c) and 2.04(e) hereof, the Exchange Fund shall not be used for any other purpose.

(b)           Promptly (and in any event within five (5) Business Days) after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a

 

certificate formerly representing Company Common Stock (a “ Certificate ”), other than Parent or Merger Sub or any wholly-owned Subsidiary of Parent or Merger Sub, (i) a letter of transmittal that shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent, which letter shall be in customary form and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration.  Upon surrender of a Certificate to the Exchange Agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor (A) one or more shares of Parent Common Stock representing, in the aggregate, the whole number of shares that such holder has the right to receive pursuant to Section 2.01(a)(i) (after taking into account all shares of Company Common Stock then held by such holder) and/or (B) a check in the amount equal to the cash that such holder has the right to receive with respect to any fractional shares of Parent Common Stock pursuant to Section 2.04(e) and dividends and other distributions pursuant to Section 2.04(c), if any, and the Certificate so surrendered shall forthwith be canceled.  No interest will be paid or will accrue on any cash payable pursuant to Section 2.04(c) or Section 2.04(e).  In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, the Merger Consideration may be issued and paid with respect to such Company Common Stock to such a transferee if the Certificate representing such shares of Company Common Stock is presented to the Exchange Agent in accordance with this Section 2.04(b), accompanied by all documents required to evidence and effect such transfer and evidence that any applicable stock transfer taxes have been paid.

(c)           No dividends or other distributions declared or made after the Effective Time with respect to Parent Common Stock, with a record date after the Effective Time, shall be paid to the holder of any unsurrendered Certificate, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.04(e), unless and until the holder of such Certificate shall surrender such Certificate in accordance with Section 2.04(b).  Subject to the effect of escheat, Tax or other applicable Laws, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) promptly, the amount of any cash payable with respect to a fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 2.04(e) and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of Parent Common Stock.

(d)           The Merger Consideration delivered upon surrender of the Certificates in accordance with the terms hereof (including any cash paid pursuant to Section 2.04(c) or Section 2.04(e)) shall be deemed to have been paid in full satisfaction of all rights pertaining to such share of Company Common Stock.

(e)           No certificates or scrip representing fractional shares of Parent Common Stock, or book-entry credit of the same, shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to Parent Common Stock shall be payable

 

on or with respect to any fractional share and such fractional share interests shall not entitle the owner thereof to any rights of a stockholder of Parent.  For purposes of this Section 2.04(e), all fractional shares to which a single record holder would be entitled shall be aggregated and calculations shall be rounded to the fourth decimal point.  In lieu of any such fractional share of Parent Common Stock, each holder of Company Common Stock otherwise entitled to a fraction of a share of Parent Common Stock will be entitled to receive from the Exchange Agent a cash payment in an amount equal to the product of (i) such fractional part of a share of Parent Common Stock multiplied by (ii) an amount equal to the average of the closing sale prices for Parent Common Stock on the OTC Bulletin Board, for each of the twenty (20) consecutive trading days ending with the second complete trading day prior to the Effective Time.

(f)            Any portion of the Exchange Fund which remains undistributed to the holders of Company Common Stock for six months after the Effective Time shall be delivered to Parent, upon demand, and, from and after such delivery to Parent, any holders of Company Common Stock who have not theretofore complied with this Article II shall thereafter look only to Parent for the Merger Consideration payable in respect of such shares of Company Common Stock, any cash in lieu of fractional shares of Parent Common Stock to which they are entitled pursuant to Section 2.04(e) and any dividends or other distributions with respect to Parent Common Stock to which they are entitled pursuant to Section 2.04(c), in each case, without any interest thereon.

(g)           Neither Parent, Merger Sub, the Surviving Corporation, the Exchange Agent nor the Company shall be liable to any holder of shares of Company Common Stock for any such shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any abandoned property, escheat or similar Law.

(h)           If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificate, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.04(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.04(c), in each case, without any interest thereon.

(i)            Parent or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as Parent or the Exchange Agent are required to deduct and withhold under the Code, or any Tax Law, with respect to the making of such payment.  To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Stock in respect of whom such deduction and withholding was made by Parent or the Exchange Agent.

 

(j)            The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by Parent, on a daily basis.  Any interest and other income resulting from such investments shall be paid to Parent upon termination of the Exchange Fund pursuant to Section 2.04(f).  In the event the cash in the Exchange Fund shall be insufficient to fully satisfy all of the payment obligations to be made by the Exchange Agent hereunder, Parent shall promptly deposit cash into the Exchange Fund in an amount which is equal to the deficiency in the amount of cash required to fully satisfy such payment obligations.

Section 2.05           Stock Transfer Books .  At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of shares of Company Common Stock theretofore outstanding on the records of the Company.  From and after the Effective Time, the holders of Certificates representing shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided herein or by Law.  On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent, for any reason, in accordance with Section 2.04(b), shall be canceled against delivery of the Merger Consideration payable in respect of the shares of Company Common Stock formerly represented by such Certificates, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.04(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.04(c), in each case, without any interest thereon.

Section 2.06           Stock Options .  Immediately prior to the Effective Time and without any action on the part of the parties hereto (except as provided in Section 2.09), each unexercised and unexpired stock option that is then outstanding under the Company 1997 Stock Option/Stock Issuance Plan, as amended (the “ Company Option Plan ”), whether vested or unvested (the “ Company Stock Options ”), shall automatically become fully vested and exercisable for all of the shares of Company Common Stock at the time subject to such Company Stock Option, and may be exercised for any or all of those shares as fully vested shares.  Each such Company Stock Option that has not been exercised immediately prior to the Effective Time of the Merger shall be terminated and cancelled by the Company and shall be of no further force or effect.

Section 2.07           Stock Rights .  Immediately prior to the Effective Time and without any action on the part of the parties hereto (except as provided in Section 2.09), each outstanding repurchase and/or cancellation right under the stock issuance program (“ Company Stock Rights ”) of the Company Option Plan, shall automatically terminate and all of the shares of Company Common Stock at the time subject to those terminated rights shall immediately vest in full.  All shares of Company Common Stock issued in connection with the termination and/or cancellation of Company Stock Rights shall be, at the Effective Time, converted into the right to receive the Merger Consideration in accordance with, and pursuant to, the terms and conditions of this Agreement.

Section 2.08           Warrants .  The Company shall use reasonable efforts and take all actions reasonably intended to provide that each outstanding warrant to purchase Company Common Stock (“ Company Warrant ”) shall have been terminated or exercised immediately prior to the Effective Time.  Company Warrants held by warrant holders who do not so agree to have such warrants exercised or cancelled prior to the Effective Time, and which survive the Merger

 

pursuant to their express terms (the “ Surviving Warrants ”), shall be assumed by Parent, and the value of such Surviving Warrants shall reduce the Merger Consideration as provided in Section 2.02 above.

Section 2.09           Further Actions .  Prior to the Effective Time, and subject to the review and approval of Parent, the Company shall take all actions necessary to effect the transactions anticipated by Section 2.06 and Section 2.07 hereof under the Company Option Plan and all Company Stock Option and Company Stock Right agreements and any other plan or arrangement of the Company (whether written or oral, formal or informal).  No later than the mailing date for the Joint Proxy Statement, the Company shall notify the holders of Company Stock Options and Company Stock Rights, which notice shall be in compliance with the terms of the Company Option Plan and such Company Stock Options and Company Stock Rights, that such Company Stock Options will be cancelled and such Company Stock Rights will be accelerated at or prior to the Effective Time in the manner set forth in Section 2.06 and Section 2.07 hereof, and that the holders of such Company Stock Options may exercise any such Company Stock Options in compliance with the terms provided in the Company Option Plan and the relevant Company Stock Option agreement governing the exercise thereof.  Materials to be submitted to the holders of Company Stock Options and Company Stock Rights in connection with the notice required under this Section 2.09 shall be subject to review and approval by Parent.  The Company shall take all appropriate or necessary steps to effect the termination of the Company Option Plan as of the Effective Time.

Section 2.10           Employee Stock Purchase Plan .  Immediately prior to the Effective Time and without any action on the part of the parties hereto, each outstanding purchase right (“ Company Purchase Rights ”) under the Company’s 1997 Employee Stock Purchase Plan, as amended (the “ Company ESPP ”) shall automatically be exercised at that time in accordance with the provisions of Section VII.G of the Company ESPP.  In addition, following the Effective Time, no Company Purchase Rights will be issued and outstanding.  Conditioned upon the occurrence of the Closing, (i) the Company ESPP will be terminated no later than the Effective Time and (ii) the Company ESPP will be suspended as of the Signing Date and no additional offering periods shall commence on or after the Signing Date.  The Company shall use its best efforts to provide participants in the Company ESPP with at least ten (10) days notice of the actions to be taken under this Section 2.10, with such notice subject to the review and approval of Parent.  The Company shall deliver to Parent prior to the Effective Time sufficient evidence that the Company ESPP will be terminated no later than the Effective Time.  In addition, prior to the Effective Time, the Company shall take all actions (including, if appropriate, amending the terms of the Company ESPP and the terms of any offering period(s) commencing prior to the Effective Time) that are necessary to provide that, as of the Effective Time, participants and former participants in the Company ESPP shall cease to have any right or interest thereunder.  Notwithstanding the foregoing, all actions taken and all amendments made pursuant to this Section 2.10 shall be taken or made in compliance with Sections 423 and 424 of the Code and so as not to result in a “modification” under such sections.  All shares of Company Common Stock issued in connection with the exercise of the Company Purchase Rights shall be, at the Effective Time, converted into the right to receive the Merger Consideration in accordance with, and pursuant to, the terms and conditions of this Agreement.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent that except as set forth in the Company SEC Documents or the disclosure letter dated as of the date hereof delivered by the Company to Parent (the “ Company Disclosure Letter ”):

Section 3.01           Organization and Qualification .  The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease, license and operate its assets and properties and to carry on its business as it is now being conducted.  The Company is qualified to transact business and, where applicable, is in good standing in each jurisdiction in which the properties owned, leased, licensed or operated by it or the nature of the business conducted by it makes such qualification necessary, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.  True, accurate and complete copies of the certificate of incorporation and bylaws of the Company, in each case, as amended and in effect on the date hereof, including all amendments thereto, have heretofore been filed with the SEC or delivered to Parent.

Section 3.02           Capitalization .

(a)           The authorized capital stock of the Company consists of 70,000,000 shares of Company Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (“ Company Preferred Stock ”).  As of September 20, 2006, (i) 3,474,865 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Preferred Stock were issued or outstanding, (iii) no shares of Company Common Stock were held in the treasury of the Company, (iv) 523,039 shares of Company Common Stock were reserved for issuance upon exercise of Company Stock Options issued and outstanding and (v) 91,706 shares of Company Common Stock were authorized and reserved for future issuance pursuant to the Company Option Plans (other than shares of Company Common Stock authorized and reserved for future issuance under the Company ESPP and upon exercise of Company Stock Options issued and outstanding).  Each issued and outstanding share of capital stock of the Company is, and each share of Company Common Stock reserved for issuance as specified above will be, upon issuance on the terms and conditions specified in the instruments pursuant to which it is issuable, duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights.  Since September 5, 2006 through the date hereof, except as permitted by this Agreement, (i) no shares of Company Common Stock have been issued, except in connection with the exercise of Company Stock Options issued and outstanding and (ii) no options, warrants, securities convertible into, or commitments with respect to the issuance of, shares of capital stock of the Company have been issued, granted or made.

(b)           Except for Company Stock Options issued and outstanding, as of the date hereof, there are no outstanding Company Purchase Rights, subscriptions, options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement and also including any rights plan or other anti-takeover agreement, obligating the

 

Company or any Subsidiary of the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of Company Common Stock or obligating the Company or any Subsidiary of the Company to grant, extend or enter into any such agreement or commitment.  As of the date hereof, there are no obligations, contingent or otherwise, of the Company to (i) repurchase, redeem or otherwise acquire any shares of Company Common Stock or the capital stock or other equity interests of any Subsidiary of the Company or (ii) provide material funds to, or make any material investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of, any Person other than a Subsidiary.  There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company or any of its Subsidiaries.  There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote.  There are no voting trusts, irrevocable proxies or other agreements or understandings to which the Company or any Subsidiary of the Company is a party or is bound with respect to the voting of any shares of Company Common Stock.  The Company has not agreed to register any securities under the Securities Act or under any state securities law or granted registration rights to any Person (except rights which have terminated or expired).  Neither the Company nor any of its Subsidiaries has any outstanding obligations in respect of prior acquisitions of businesses to pay, in the form of securities, cash or other property, any portion of the consideration payable to the seller or sellers in such transaction.

(c)           The Company has previously made available to Parent complete and correct copies of the Company Option Plans and the Company ESPP.  As of the date hereof, there are no shares of restricted stock of the Company and no Company Purchase Rights outstanding.

Section 3.03           Subsidiaries .  Each Subsidiary of the Company is duly organized, validly existing and, where applicable, in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own, lease, license and operate its assets and properties and to carry on its business as it is now being conducted, and each Subsidiary of the Company is qualified to transact business, and is in good standing, in each jurisdiction in which the properties owned, leased, licensed or operated by it or the nature of the business conducted by it makes such qualification necessary, except in all cases as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company.  All of the outstanding shares of capital stock or other equity interests of each Subsidiary of the Company are validly issued, fully paid, nonassessable and free of preemptive rights and are owned directly or indirectly by the Company.  There are no subscriptions, options, warrants, voting trusts, proxies or other commitments, understandings, restrictions or arrangements relating to the issuance, sale, voting or transfer of any shares of capital stock or other equity interests of any Subsidiary of the Company, including any right of conversion or exchange under any outstanding security, instrument or agreement.  The Company has no material investment in any entity other than its Subsidiaries.

Section 3.04           Authority; Non-Contravention; Approvals .

(a)           The Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining necessary

 

stockholder approval in connection with this Agreement and the Merger, to consummate the Merger and the other transactions contemplated by this Agreement.  The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than the approval and adoption of this Agreement and the Merger by the affirmative votes of the holders of a majority of the outstanding shares of Company Common Stock and the filing and recordation of appropriate merger documents as required by the DGCL).  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting the rights and remedies of creditors generally and the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).  The affirmative vote of the holders of a majority of the outstanding Company Common Stock entitled to vote at a duly called and held meeting of the Company’s stockholders is the only vote of the holders of capital stock of the Company necessary to approve and adopt this Agreement and the Merger (the “ Company Stockholder Approval ”).

(b)           At a meeting duly called and held on September 20, 2006, the Board of Directors of the Company unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are advisable and in the best interests of the Company and the Company’s stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger and (iii) resolved to recommend approval and adoption of this Agreement and the Merger by the Company’s stockholders.  The actions taken by the Board of Directors of the Company constitute approval of the Merger, this Agreement and the other transactions contemplated hereby by the Board of Directors of the Company under the provisions of Section 203 of the DGCL such that the restrictions on “business combinations” as set forth in Section 203 of the DGCL do not apply to this Agreement or the transactions contemplated hereby.  No other takeover statute or other similar statute or regulation relating to the Company is applicable to the Merger or the transactions contemplated by this Agreement.  With the exception of MedCap Partners L.P. and its affiliates, and without giving effect to the execution of this Agreement, neither the Company nor any affiliate or associate of the Company is, or has been during the last three years, an “interested stockholder” (as defined in Section 203 of the DGCL) of Parent.

(c)           The execution, delivery and performance of this Agreement by the Company and the consummation of the Merger and the other transactions contemplated hereby do not and will not violate, conflict with, give rise to the right to modify or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or require any offer to purchase or any prepayment of any debt, or result in the creation of any Lien, security interest or encumbrance upon any of the properties or assets of the Company or any of its Subsidiaries under any of the terms, conditions or provisions of (i) the respective certificate of incorporation

 

or bylaws or similar governing documents of the Company or any of its Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any Governmental Entity applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, subject in the case of consummation, to obtaining the Company Required Statutory Approvals and the Company Stockholder Approval, or (iii) any Company Permit or Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound or affected, other than, in the case of (ii) and (iii) above, such violations, conflicts, rights to modify, breaches, defaults, terminations, accelerations or creations of Liens, security interests or encumbrances that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company.

(d)           Except for (i) the applicable requirements of the Exchange Act, (ii) the filing of the Certificate of Merger and (iii) any required filings under the rules and regulations of the Nasdaq Capital Market (the filings and approvals referred to in clauses (i) through (iii) collectively, the “ Company Required Statutory Approvals ”), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any Governmental Entity is necessary for the execution and delivery of this Agreement by the Company or the consummation by the Company of the Merger and the other transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company.

Section 3.05           Reports and Financial Statements .

(a)           Since January 1, 2001, the Company has filed with the SEC all material forms, registration statements, prospectuses, reports, schedules and documents (including all exhibits, post-effective amendments and supplements thereto) (the “ Company SEC Documents ”) required to be filed by it under each of the Securities Act and the Exchange Act, all of which, as amended if applicable, complied in all material respects as to form with all applicable requirements of the appropriate Act, SOX and the rules and regulations thereunder.  As of their respective dates (taking into account any amendments or supplements filed prior to the date hereof), the Company SEC Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(b)           Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of SOX and the rules and regulations of the SEC promulgated thereunder with respect to the Company SEC Documents, and to the Knowledge of the Company, the statements contained in such certifications are true and correct.  For purposes of this Section 3.05(b), “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in SOX.  Neither the Company nor any of its Subsidiaries has outstanding, or has arranged any

 

outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of SOX.

(c)           Section 3.05(c) of the Company Disclosure Letter fairly presents a complete and accurate account of the Company’s cash, accounts receivables and accounts payable as of the Signing Date.  The consolidated financial statements of the Company included in the Company SEC Documents comply as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q or 8-K or the applicable rules of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which are not material).  The books and records of the Company and its Subsidiaries are maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements.

(d)           Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar contract or arrangement (including any contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such contract or arrangement is to avoid disclosure of any material transaction involving, or material Liabilities of, the Company or any of its Subsidiaries in the Company’s or such Subsidiary’s published financial statements or other of the Company SEC Documents.

(e)           The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(f)            The Company has in place the “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) required in order for the Chief Executive Officer and Chief Financial Officer of the Company to engage in the review and evaluation process mandated by the Exchange Act and the rules promulgated thereunder.  The Company’s “disclosure controls and procedures” are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Company’s management as appropriate to

 

allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the Company required under the Exchange Act with respect to such reports.

(g)           Except as otherwise disclosed in the Company SEC Documents, since December 31, 2000, the Company has not received from its independent auditors any oral or written notification of a (x) ”reportable condition” or (y) ”material weakness” in the Company’s internal controls.  For purposes of this Agreement, the terms “reportable condition” and “material weakness” shall have the meanings assigned to them in the Statements of Auditing Standards 60, as in effect on the date hereof.

Section 3.06           Absence of Undisclosed Liabilities .  Except as disclosed in the audited financial statements included in the Company’s Form 10-K for the year ended December 31, 2005 (the “ Company 10-K ”) or the Company’s Form 10-Q for the period ended June 30, 2006 (the “ Company 10-Q ”), neither the Company nor any of its Subsidiaries has as of the date hereof any Liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except Liabilities, obligations or contingencies (a) which were incurred in the ordinary course of business and consistent with past practices, (b) which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company or (c) which are of a nature not required to be reflected in the consolidated financial statements of the Company and its Subsidiaries prepared in accordance with GAAP consistently applied.

Section 3.07           Litigation .  Except as disclosed in the Company SEC Documents prior to the date hereof, as of the date hereof, there are no Actions pending, or, to the Knowledge of the Company, threatened in writing against, which relate to or affect the Company or any of its Subsidiaries, before any court or other Governmental Entity or any arbitrator that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company.  As of the date hereof, neither the Company nor any of its Subsidiaries is subject to any judgment, decree, injunction, rule or order of any Governmental Entity or any arbitrator which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Company.  There has not, within the last four years, been nor, as of the date hereof, are there any internal investigations or inquiries being conducted by the Company, the Board of Directors of the Company (or any committee thereof) or any other Person at the request of any of the foregoing concerning any financial, accounting, Tax, conflict of interest, self-dealing, fraudulent or deceptive conduct or other misfeasance or malfeasance issues.

Section 3.08           Registration Statement, Etc .  None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in (a) the Registration Statement to be filed by Parent with the SEC to register the shares of Parent Common Stock to be issued in the Merger (the “ Registration Statement ”), (b) the Joint Proxy Statement/Prospectus (the “ Joint Proxy Statement ”) to be mailed to the Company’s stockholders in connection with the meeting of the Company’s stockholders (the “ Company Stockholders’ Meeting ”) to be called to consider this Agreement and to Parent’s stockholders in connection with the meeting of Parent’s stockholders (the “ Parent Stockholders’ Meeting ”) to be called to consider the Share Issuance and (c) any other documents to be filed with the SEC in connection with the transactions contemplated hereby will, at the respective times such documents are filed and at the time such documents become effective or at the time any

 

amendment or supplement thereto becomes effective, contain any untrue statement of a material fact, or omit to state any material fact required or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; and, in the case of the Registration Statement, when it becomes effective or at the time any amendment or supplement thereto becomes effective, will cause the Registration Statement or such supplement or amendment to contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or which is necessary in order to make the statements therein not misleading, or, in the case of the Joint Proxy Statement, when first mailed to the stockholders of the Company and the stockholders of Parent, or in the case of the Joint Proxy Statement or any amendment thereof or supplement thereto, at the time of the Company Stockholders’ Meeting or the time of the Parent Stockholders’ Meeting, will cause the Joint Proxy Statement or any amendment thereof or supplement thereto to contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Notwithstanding the foregoing, no representation is made by the Company with respect to statements made in any such documents based on information supplied by Parent or with respect to information concerning Parent which is incorporated by reference in such documents.

Section 3.09           Compliance with Applicable Law .  The Company and its Subsidiaries are, and have been at all times since January 1, 2001, in compliance with all applicable Laws relating to the Company and its Subsidiaries or their respective businesses, assets or properties, except where the failure to be in compliance with such applicable Law would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.

Section 3.10           Taxes .

(a)           Each of the Company and its Subsidiaries has (i) duly and timely filed with the appropriate Tax authority all Tax Returns required to be filed by it through the date hereof, and all such Tax Returns are true, correct and complete in all respects and (ii) paid all Taxes due and owing (whether or not shown due on any Tax Returns), except in each case where the failure to pay such Taxes or the failure of such Tax Returns to be true, correct or complete in all respects would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.  Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return nor has the Company or any Subsidiary extended the statute of limitations as to any Tax Return that has not expired as of the date hereof.

(b)           The unpaid Taxes of the Company and its Subsidiaries did not, as of the date of the financial statements contained in the most recent Company SEC Documents, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets (rather than in any notes thereto) contained in such financial statements.  Since the date of the financial statements in the most recent Company SEC Documents, neither the Company nor any of its Subsidiaries has incurred any liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.

 

(c)           No deficiencies for Taxes with respect to any of the Company and its Subsidiaries have been set forth or claimed in writing, or proposed or assessed by a Tax authority in writing.  There are no pending or, to the Knowledge of the Company, proposed or threatened audits, investigations, disputes or claims or other actions for or relating to any Liability for Taxes with respect to any of the Company and its Subsidiaries, and there are no matters under discussion with any Tax authority, or known to the Company, with respect to Taxes that are likely to result in a Liability for Taxes with respect to any of the Company and its Subsidiaries.  No issues relating to Taxes of the Company or its Subsidiaries were raised by the relevant Tax authority in any completed audit or examination that would reasonably be expected to recur with a Material Adverse Effect on Taxes in a later taxable period.

(d)           There are no Tax sharing arrangements or similar arrangements (including indemnity arrangements) with respect to or involving any of the Company and its Subsidiaries, and, after the Closing Date, none of the Company and its Subsidiaries shall be bound by any such Tax sharing arrangements or similar arrangements or have any Liability thereunder for amounts due in respect of periods prior to the Closing Date.

(e)           Except for the affiliated group of which the Company is the common parent, each of the Company and its Subsidiaries is not and has never been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code or any group that has filed a combined, consolidated or unitary Tax Return.  Neither the Company nor any of its Subsidiaries has Liability for the Taxes of any Person other than the Company and its Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise.

(f)            Neither the Company nor any of its Subsidiaries has been a party to a transaction that is or is substantially similar to a “listed transaction,” as such term is defined in Treasury Regulations Section 1.6011-4(b)(2).

(g)           The transactions contemplated by this Agreement will not result in the payment or series of payments by the Company to any person of a “parachute payment” within the meaning of Section 280G of the Code, or any other similar payment, which is not deductible for federal, state, local or foreign Tax purposes.  Additionally, there is no arrangement or agreement to which the Company is a party, including provisions of this Agreement which, individually or collectively, (i) could give rise to the payment of any amount that would not be deductible pursuant to Section 162(m) of Section 280G of the Code, (ii) is subject to Section 409A of the Code, or (iii) could require Parent or any affiliate of Parent to gross up a payment to any employee or other service provider of the Company for tax related payments or cause an excise or additional tax under Section 409A and/or Section 4999 of the Code.

Section 3.11           Employee Benefit Plans; ERISA .

(a)           Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company: (i) the Company and its Subsidiaries have complied, and are now in compliance, with all provisions of all laws and regulations applicable to Company Benefit Plans and each Company Benefit Plan has been administered in accordance with its terms, including the making of all required contributions and

 

the reflection by the Company of all required accruals on its financial statements; (ii) no event or condition exists which would reasonably be expected to subject the Company or any of its Subsidiaries to Liability in connection with the Company Benefit Plans or any plan, program, or policy sponsored or contributed to by any of their respective ERISA Affiliates other than the provision of benefits thereunder in the ordinary course; and (iii) there are no pending or, to the Company’s Knowledge, threatened Actions (other than claims for benefits in the ordinary course) relating to Company Benefit Plans which have been asserted or instituted and which would reasonably be expected to result in any Liability of the Company or any of its Subsidiaries.

(b)           No Company Benefit Plan or Company ERISA Affiliate Plan is, or has ever been, subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code.  No Company Benefit Plan or Company ERISA Affiliate Plan is, or has ever been, a Multiemployer Plan.  Any Company Benefit Plan which is intended to be qualified under Section 401(a) of the Code has, to the extent applicable, received a determination letter from the IRS evidencing such qualification.

Section 3.12           Opinion of Financial Advisor .  The Company’s financial advisor, B. Mason Flemming & Co., Inc. (the “ Company Financial Advisor ”), has delivered to the Company’s Board of Directors an oral opinion, to be confirmed in writing, to the effect that, as of the date of this Agreement, the Merger Consideration is fair, from a financial point of view, to the holders of Company Common Stock.

Section 3.13           Brokers and Finders .  The Company and its Subsidiaries have not entered into any contract, arrangement or understanding with any Person or firm which may result in the obligation of the Company or any of its Subsidiaries to pay any investment banking fees, finder’s fees, or brokerage commissions in connection with the transactions contemplated hereby, other than fees payable to the Company Financial Advisor.  The Company has delivered to Parent a true and complete copy of the engagement letter between the Company and the Company Financial Advisor.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent represents and warrants to the Company that except as set forth in the Parent SEC Documents or the disclosure letter dated as of the date hereof delivered by Parent to the Company (the “ Parent Disclosure Letter ”):

Section 4.01           Organization and Qualification .  Parent is a corporation duly organized and validly existing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease, license and operate its assets and properties and to carry on its business as it is now being conducted.  Parent is qualified to transact business and, where applicable, is in good standing in each jurisdiction in which the properties owned, leased, licensed or operated by it or the nature of the business conducted by it makes such qualification necessary, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent.  True, accurate and complete copies of the certificate of